Fulfillment pricing: Why industry standard rates are bad for business

If you’ve ever searched for fulfillment pricing and costs, you’ve probably seen just how cumbersome and difficult to understand most pricing is within the industry. If you don’t have any previous experience with fulfillment services and fees, then get ready for an interesting journey!

Most fulfillment company’s pricing is very challenging to understand and overly complicated, oftentimes with page after page of potential charges.

In this blog post we’re going to explore what most fulfillment companies charge their customers, why these standard rate structures aren’t the best for your business, and explain ESTCO’s pricing model, which offers a unique and refreshing approach that flies in stark contrast to the industry norm.

What do most fulfillment companies charge for fulfillment?

Historically, companies charge their customers using a model that is based off of an activity basis – meaning that they charge a different fee for each ‘activity’ they perform for you.

For example, there is a receiving fee in order to count and receive your products into inventory, a storage fee to store all of your products in their warehouse, a pick and pack fee to prepare each order for shipment, a shipping fee to ship your product to customers, a set-up fee to activate your account, an account management fee to provide customer service, and many other potential fees.

Oftentimes, the laundry list of charges is so long that it can be difficult to appropriately audit the bill. Also, companies have been known to even see charges show up on the first invoice that weren’t anticipated.

Why the standard pricing model isn’t the best for you

After taking a quick look at the standard industry rates, it’s easy to understand why customers using fulfillment services don’t necessarily find the common rate structures the best option.

First and foremost, long and overly complicated pricing is very difficult to understand, especially for newer companies without much track record and historical data.

Secondly, when you’re paying your monthly fulfillment invoice that spans multiple pages, it’s easy to feel as though the warehouse is ‘nickel and diming’ you to death.

Third, in an interesting twist of fate, long and drawn out fulfillment models are very difficult to implement, requiring warehousing companies to build intricate technology and procedural systems in order to successfully track and compile the invoices.

Finally, industry standard rates are very hard to compare when looking at various 3PL options due to the complexity. As you can imagine, each warehouse charges different rates and combinations of fees, which may require a professional accountant to analyze.

Even the industry leader, Amazon, has page after page of fulfillment fees, with complicated scenarios depending upon the types of sales you make and the sales channels you utilize.

A better way: flat fees

ESTCO’s fees are simple and reasonable. We charge a flat fee per order and a flat fee per return – that’s it! And you can utilize our steeply discounted freight rates in order to save even more with shipping (most companies only give you a small portion of their shipping discounts so they can make an even higher profit).

With our fulfillment services, you won’t get charged:

Stocking/Warehousing Fees

Admin Fees

Pallet Fees

Minimum Fees

Expedite Fees

Return Fees

Monthly Charges

It’s just a simple flat fee per order and flat fee per return.

Keep these tips in mind when you’re comparing fulfillment pricing

If you’re comparing different fulfillment pricing, don’t forget that comparing apples to apples is challenging because everyone charges different fees. Other companies may charge a very low pick and pack price per order for fulfillment fees, but they will charge many other fees that will more than compensate for the difference in lower order fees.

As an example, you may also get charged $10 per pallet per month for storage, $100+ per month for admin fees, monthly minimum charges, higher return fees (on average fulfillment companies typically charge a higher return fee than their order fulfillment fee, unlike ESTCO which charges a lower return fee), etc. Remember, ESTCO doesn’t charge ANY of these other fees.

Most importantly, when comparing costs, don’t focus on pick and pack charges only and instead, look at the full picture. Finally, keep in mind that a simple pricing model is easier to implement for the warehouse and easier to audit for the customer. Rather than spending excess time sifting through fulfillment charges, you’ll be able to spend more of your valuable time running the critical aspects of your business.